Spend or Save?

rob78

Hi,

I have a question and would appreciate some unbiased opinions.

I am married with 2 young children, I work full time and my wife works part time.

We are in our mid 30's and have paid off our mortgage and live in a 3 bed semi worth around £195,000.

We have been saving hard now for our next step up the property ladder to a 4 bed detached which would cost approx. £340,000. We have total savings of £122,000.

Having got to the point where we can afford the new house with a £50,000 mortgage, and putting down most of our savings we are starting to wonder if it's the right thing to do. Our house is nice but maybe a little small but we are coping ok at the moment.

Are we just being greedy? should we stay where we are? would a bigger house be that great?

Do you think we should:

A. Stay and be mortgage free and invest our savings (in what?)
B. Buy the house we want, spending most of our savings and take on a £50,000 mortgage again.
C. stay and just keep the money in the bank as a nest egg.
D. We could put a small double storey extension to the side of our house which would be useful but would cost 50k and turn our House into a 4 bed semi which we have been told we would only just get our money back if we sold it.
E. Any other ideas.

I want to do the right thing for the future of my family and was just looking for opinions.

Thanks

Suarez

You could buy the new house with the 120k deposit and get a 200k mortgage and rent your current property out.

Then when property prices rise, sell the rented property

meg72

rob78 wrote: »

Hi,

I have a question and would appreciate some unbiased opinions.

I am married with 2 young children, I work full time and my wife works part time.

We are in our mid 30's and have paid off our mortgage and live in a 3 bed semi worth around £195,000.

We have been saving hard now for our next step up the property ladder to a 4 bed detached which would cost approx. £340,000. We have total savings of £122,000.

Having got to the point where we can afford the new house with a £50,000 mortgage, and putting down most of our savings we are starting to wonder if it's the right thing to do. Our house is nice but maybe a little small but we are coping ok at the moment.

Are we just being greedy? should we stay where we are? would a bigger house be that great?

Do you think we should:

A. Stay and be mortgage free and invest our savings (in what?)
B. Buy the house we want, spending most of our savings and take on a £50,000 mortgage again.
C. stay and just keep the money in the bank as a nest egg.
D. We could put a small double storey extension to the side of our house which would be useful but would cost 50k and turn our House into a 4 bed semi which we have been told we would only just get our money back if we sold it.
E. Any other ideas.

I want to do the right thing for the future of my family and was just looking for opinions.

Thanks

You say you are coping in your house for the moment, I would stay for a while, put your money in the bank, no rush at your age, and then see what the future holds.

McKneff

Do either of you have a pension fund for your retirement.

Barbeduk

Suarez makes a good point. That's your retirement income sorted then. Or you could stay where you are and use the money you've saved to buy a renter or doer upper.

Have you looked at any bigger houses? You need to see whether they're so good you want to take on the additional debt. Unless you see a house you really love it doesn't seem worth the upheaval and extra expense if you're happy where you are.

rob78

Hi,

Thanks for all your opinions. To answer the questions: We can't get a decent 4 bed under about £335k. I work in print so my job is not totally secure but then who's is! My wife is a teacher so that's fairly safe. We are both saving into a company pension scheme. The type of house we are looking for is within a mile of where we are living so no change of schools or big upheaval would be involved.

I like the idea of getting a house to rent out but that leaves me exposed twice if something was to happen to the property market.

With regards to house prices I live in East Anglia and the house prices have never been higher and they seem to be rising in our area if anything. The trouble is there are a lot of people looking for a similar type of property in the same area so that pushes the price up.

We could extend but the size of the extension would be limited to the small piece of land we have on the side of the house.

Don't get me wrong we love our house and the area, we could manage but would like a bit more room.

I have always fancied doing the 'homes under the hammer' thing but not sure where to start of if I could make it work!

If we stay and don't move I don't want to look back and think why on earth didn't we buy that bigger house when we were young-ish, the cost of borrowing was at an all time low and now we could have the option of downsizing to fund our retirement.

On the other hand I don't want to spend all my savings take on a new mortgage and then loose my job or something happen and I look back and think I had no mortgage and large savings and was stress free!w

The trouble is the jump from 3 bed-semi to 4 bed detached is so much but it wouldn't be worth moving to something in between.

Still Confused.

stedwell

Barbeduk makes a good point. Have you viewed any 4 bedroom houses? Are they really good? I moved up 2 years ago and I really regret it but that is because I did it too late. We tried to move when we were in our thirties and then lost the house we wanted, so didn't try again. I really really wish we had done it then. It is so much easier when the children are younger. I am now trying to pay a mortgage, university fees, driving lessons when I feel we should be having fun. I think your house is really important as you spend every day there and need to be happy with your space but you also need to be really sure that you don't have that already. Don't know if my thoughts help but your post struck a chord as I wrestled with exactly the same decision. Good luck.

beachie

I have the same issue. I currently live in a flat which is nice, but quite small and I really miss having a garden.

It's also 14 miles from work so the commute can be a little annoying and obviouslty have to pay ground rent.

I am looking at the idea of buying a house for £140k, but they need quite a bit of work. I am totally up for doing the work as really enjoy it. I have seen a couple with 3 bedrooms so could rent out at least one of them (tax would come in if I rented both of them).

I may not be spending anymore on the mortgage due to the rent received and would save £500 or so on petrol a year and £600 ground rent but then I am at risk of falling house prices and larger issues such as needing to replace the roof or something.

I also wonder what happens if I meet someone shortly after and we want to move in together. Would they come and live with me? Would I have to spend a fortune moving again?

Logic would say I stay put here for at least 2-3 years, save like mad for a £14k deposit and rent this place out for £450 a month. Over the rest of my life this would bring in £270'000 in rent compared to a current value of £95000 (obviously this doesnt take into account inflation).

lulabelle1

If the idea is in your head and your heart then I don't think you will be able to get away from the idea/desire that you have to move......

Everything in life is uncertain, but you would be in an excellent position - the house of your dreams and virtually no mortgage.

No one knows what the future holds but the equity that you will have should provide some peace of mind.

Worse case scenario, you could sell the house.......

Everything we do is all about taking risks, I do believe that so long as the risk is calculated and balanced then there is no reason to go for it.

If the worse case scenario when weighing these options up, is that you would have to downsize again, then that wouldn't really be the end of the world.

It sounds like you are fairly frugal anyway, so I'm sure that you would soon be able to build up a nice little savings cushion to fall back on.

I'd personally say, go for it, enjoy what you've worked hard for. Perhaps hold £10/£20K of the savings back for security and peace of mind and increase the mortgage amount a bit. Perhaps go for an offset as it seems that this would work best for you.

Good luck and I hope it all works out well for you and your family.

L